[Federal Register Volume 60, Number 57 (Friday, March 24, 1995)]
[Notices]
[Pages 15615-15616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7242]
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SECURITIES AND EXCHANGE COMMISSION
Self-Regulatory Organizations; Midwest Clearing Corporation;
Order Approving Proposed Rule Change Relating to Implementation of a
Three-Day Settlement Standard
[Release No. 34-35514; File No. SR-MCC-94-16]
March 17, 1995.
On December 28, 1994, the Midwest Clearing Corporation (``MCC'')
filed a proposed rule change (File No. SR-MCC-94-16) with the
Securities and Exchange Commission (``Commission'') pursuant to section
19(b) of the Securities Exchange Act of 1934 (``Act'').\1\ Notice of
the proposal was published in the Federal Register on January 27, 1995,
to solicit comments from interested persons.\2\ As discussed below,
this order approves the proposed rule change.
\1\15 U.S.C. 78s(b) (1988).
\2\Securities Exchange Act Release No. 35256 (January 20, 1995),
60 FR 5444.
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I. Description
In October 1993, the Commission adopted Rule 15c6-1 under the
Act\3\ which establishes three business days after the trade date
(``T+3''), instead of five business days (``T+5''), as the standard
settlement cycle for most securities transactions. The rule will become
effective June 7, 1995.\4\ Several of MCC's rules are interrelated with
settlement time frames. The purpose of the proposed rule change is to
amend MCC's rules to be consistent with a T+3 settlement standard for
securities transactions.
\3\17 CFR 240.15c6-1.
\4\Securities Exchange Act Release Nos. 33023 (October 6, 1993),
58 FR 52891 (adoption of Rule 15c6-1) and 34952 (November 9, 1994),
59 FR 59137 (changing effective date from June 1, 1995, to June 7,
1995).
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The proposed rule change amends Interpretations and Policies .01 of
Article II, Rule 2 of MCC's rules to shorten the time frame in which
contract data or comparison data must be submitted to MCC to ensure
that MCC has sufficient time to review such contracts and receive the
necessary protection to guarantee the performance of such contract to
the contra-broker in a T+3 environment. Under such interpretations, MCC
reserves the right to cause such contract to be settled under the
trade-by-trade system or to reverse the trade in the continuous net
settlement system (1) if a regular way contract is not recorded by MCC
in a participant's account until T+2, (2) if a regular way contract is
not submitted by another clearing corporation for recordation in a
participant's account until T+2, or (3) if the contract is to be
settled through the participant's account at another clearing
corporation and the contract is not recorded until T+1.
The proposed rule change also is amending Article III, Rule 2,
Section 9 to state that a participant will be deemed to have requested
delivery of a security if the participant has entered into contracts to
be settled by MCC which will result in net settling sales of such
security by the participant during the next two business days. The
proposed rule change also amends the definition of ``as-of contract''
in Article I, Rule 1 to include contracts for which [[Page 15616]] the
intended date of settlement is one to two days after the recording of
the transaction by MCC.
MCC has requested that the proposed rule change become effective on
the same date as Rule 15c6-1. Rule 15c6-1 becomes effective on June 7,
1995.\5\
\5\The transition from five day settlement to three day
settlement will occur over a four day period. Friday, June 2, will
be the last trading day with five business day settlement. Monday,
June 5, and Tuesday, June 6, will be trading days with four business
day settlement. Wednesday, June 7, will be the first trading day
with three business day settlement. As a result, trades from June 2
and June 5 will settle on Friday, June 9. Trades from June 6 and
June 7 will settle on Monday, June 12.
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II. Discussion
The Commission believes the proposal is consistent with the
requirements of Section 17A of the Act.\6\ Specifically, Section
17A(b)(3)(F)\7\ states that the rules of a clearing agency must be
designed to assure the safeguarding of securities and funds which are
in the MCC's custody or control or for which MCC is responsible and
must be designed to foster cooperation and coordination with persons
engaged in the clearance and settlement of securities transactions.
Several of MCC rules are based on a five day time frame for settlement
of securities transactions. On June 7, 1995, the new settlement cycle
of T+3 will be established as mandated by the Commission's Rule 15c6-1.
As a result, the MCC's current rules will be inconsistent with the
Commission's rule. This proposal will amend the MCC's rules to
harmonize them with Commission's Rule 15c6-1 and a T+3 settlement
cycle.
\6\15 U.S.C. 78q-1 (1988).
\7\15 U.S.C. 78q-1(b)(3)) (F) (1988).
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III. Conclusion
For the reasons stated above, the Commission finds that MCC's
proposal is consistent with Section 17A of the Act.\8\
\8\15 U.S.C. 78q-1 (1988).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (File No. SR-MCC-94-16) be and
hereby is approved and will become effective June 7, 1995.
\9\15 U.S.C. 78s(b)(2) (1988).
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For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\10\
\10\17 CFR 200.30(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-7242 Filed 2-23-95; 8:45 am]
BILLING CODE 8010-01-M
